A fair tax system – income tax threshold increased to £10k

Nick Clegg on Monday outlined Liberal Democrat reform of the tax system to increase the income tax threshold to £10k a year, meaning that 3.6m people will be taken out of taxation and a tax cut of up to £700 a year for most working people and £100 for pensioners.

The proposals will make a huge difference to many people, especially those on low incomes, our proposals will make a bigger difference to ordinary hardworking people than the Conservative scrapping of the National Insurance increase and their marriage tax allowance. The Conservative proposals would give c. £300 back a year, or £450 a year per couple, compared to £1,400 per couple under the Liberal Democrats (married or not).

The change to the tax system will help to remove the poverty trap (which can be removed further in the long run with a local income tax to replace the council tax) encouraging people to work, as well as a great assistance to young people first starting work. The £10k income tax threshold has been welcomed by Lord Digby Jones and Norman Tebbit, not usual Lib Dem supporters, but policies which get cross party support is always good. 

The policy will cost £17bn a year, but will be funded by a mansion tax on properties over £2m, aviation tax on flights not per passenger, changes to the pensions tax relief for higher rate tax payers, aligning Capital Gains Tax with Income Tax to reduce the rich from tax avoidance and anti-avoidance measures.

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Lib Dems believe in power at a local level to the people

I was watching Michael Portillo’s Power to the People , which was on over the weekend and he was advocating giving more power to local people and also for increased accountability. Not sure if Michael’s become a Liberal Democrat but that’s what we’ve been saying for years. I almost fell off my sofa when he even advocated “a local sales or income tax” to replace the council tax (Portillo was famously the Minister in charge of implementing the Poll tax).

Lib Dem measures to empower local people would be:

  • Local authorities to have the ability to set their own local income tax (in place of council tax) and keep the revenue.
  • Local authorities to set their own business rates, not have it set nationally, and also to keep the revenue. 
  • Locally elected health boards and police authorities so these services deliver what you need.
  • Allow local people to have a say in planning decisions and have the right of appeal.
  • Protect local shops and pubs, by cutting the business rate if they are the last one in the village.
  • Ability to sack your MP if they have done something wrong. Power should be in the hands of voters at all times, not just on Election Day.